Doing Business

Apr 09, 1998

By John Makulowich

For some, the notion of the government doing business over the Internet would qualify as the paradigm case of an oxymoron. But take the concept broadly and add a pinch of National Performance Review. What you wind up with is attention to issues of productivity, overhead reduction, efficiency and effectiveness - all standard business concerns.

The administration does not support entering into regulation that would limit the marketplace in the development of electronic payments.

-Ira Magaziner Clinton adviser

On Nov. 13, courtesy of Deloitte & Touche LLP and Yahoo!, Magaziner participated in an Internet "chat" discussion about the future of electronic commerce from his office in the White House, providing answers to questions typed in from members of the "audience."

What came across loud and clear was the number and extent of the potholes on the road to e-commerce worldwide as well as in the United States. Among the issues that stand out in the discussion were the current stage of development of infrastructure to support e-commerce outside the United States, the possible discriminatory taxation of the Internet by European Union countries, potential barriers across international boundaries that may slow the international development of the Internet, the imposition by foreign countries of withholding taxes on software and online content, the impact of proposed state tax collection by traditional mail order companies on Internet transactions and potential difficulties surrounding the question of who internationally might control the development of electronic payments.

Among his replies, Magaziner noted that infrastructure is developing quickly in most developed countries, including Scandinavia, Japan, Malaysia, Canada and Australia. Not surprisingly, in his consistently applied approach, he said the administration supports "no discriminatory taxation against the Internet. No bit taxes, no Internet access taxes and no Internet telephony taxes. We think that existing taxation could be applied in a neutral manner that is simple and uniform."

He noted that the Clinton administration has proposed a whole series of measures to eliminate barriers across international boundaries that could slow the international development of the Internet. They included proposals that governments not regulate Internet access, that they not have any barriers to Internet service provision, that there be no tariffs on the Internet and that there be no government regulations which prohibit companies from freely doing business.

Magaziner suggested that other nations must review existing laws in the United States to ensure this country does not have regulations in place that will impede electronic commerce. He also said that e-commerce would affect business in developing countries positively by helping to overcome the barriers of distribution and the high costs of distribution.

"Also, as the lower orbital satellites are deployed over the next decade, it will be possible for consumers in rural areas of poor countries to have access to information and businesses around the world. And this access will be cheaper than building telephone lines for those people. This will help overall with the economic and social development of foreign nations," Magaziner said in response to a question from the Internet audience.

On another issue, he noted that the president in July called for the achievement of a tariff free zone on the Internet by July 1, 1998. He also said the administration does not support entering into regulation that would limit the marketplace in the development of electronic payments.

"Nobody knows where it will develop. Maybe it will be traditional banks, software companies, associations of retailers? Even companies that don't exist yet. We [administration] think it would be a mistake to limit the development of e-payment. Of course, the banking authorities need to be involved to limit the possibility of fraud. We think it's premature to regulate or limit the type of payment systems that emerge or who develops them," said Magaziner.

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